Written Commentary
CRUDE OIL
After a sizable rebound from their 2023 lows, crude oil and the products have lost their upside momentum in the latter half of this week. Unless a rebound in global risk sentiment can improve the demand outlook, the markets are likely to have a downbeat finish to the week. June crude oil came under severe pressure at midsession yesterday and finished with a heavy loss, and it saw some follow-through selling overnight. Sluggish Chinese inflation data has weakened that nation’s energy demand outlook. OPEC has forecast that world oil demand would increase by 2.33 million barrels per day, which was nearly unchanged from their previous estimate. The group’s statement that US debt ceiling issues could have “economic consequences” seemed to put additional pressure on prices yesterday. US refinery throughput has been consistently above 15 million bpd since March, and refinery utilization has moved back above 90%, but weekly US crude oil production has ranged between 12.2 million and 12.3 million bpd. As a result, there may be more attention paid to today’s weekly Baker Hughes US oil rig count.
NATURAL GAS
Natural gas prices slipped in the last few days, but they remain on-track for a positive weekly result. June natural gas traded in a tight range on Thursday and ended the session with a minimal loss. The weekly EIA storage report showed a net injection of 78 bcf, which was close to expectations. Total storage was 2,141 bcf, 18.4% above the five-year average. The 6-10-day forecast has above average temperatures from the Rockies to the Pacific Coast, which could give a boost to power plant demand as air conditioners in those regions come back into regular use. US dry gas production continues to hold above 100 bcf/day, and US LNG exports are holding above 13 bcf/day with the Freeport LNG terminal back at full capacity. The spike in western US temperatures should underpin natural gas prices.
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